Economies of Global Scale

Companies may realize economies of global scale by taking a number of steps, such as (1) spreading fixed costs—R&D, operations, and advertising; (2) reducing capital and operating costs per unit when production capacity is increased; (3) pooling purchase power— volumetric discounts and lower unit transactions costs by sourcing from a few large suppliers; and (4) creating a critical mass of talent—centers of excellence for specific products and technologies.

Autobytel refined a global baseline architecture that consisted of software modules that can be snapped together in various combinations, depending on the local needs. There are hooks for adding customer software when required. New features invented for a specific country may be incorporated back into the baseline if it seems likely that they will be used elsewhere.

There are a number of counterbalancing factors to consider. Too much centralization in product manufacturing can mandate higher costs of distribution. Concentrated production can also isolate the company from the targeted marketplace. Procurement from a few suppliers generates dependency and constraint, insofar as supply disruptions related to labor unrest, access to world-class technologies, and utilization of existing competencies are concerned.

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